International Business Law
Professor John T. Robinson, Esq.
1. Page 103 #5
What are the risks associated with arbitration? Why might a company prefer to settle disputes by litigation? What are the advantages of arbitration?
When deciding the means off settling a dispute, parties should heavily consider the advantages as well as disadvantages of all possible options. Arbitration, in most cases seen to be more efficient, speedier and less costly than resorting to trial by jury, however the downsides and risks are various. That largest risk in choosing arbitration as an option is the finality of the decision.
• The arbitration tribunal renders an award that is enforceable in court with very narrow grounds of appeal called “vacatur.” Once a decision is rendered in a binding arbitration, the parties are generally stuck with that decision. This places the parties at risk to any unfairness and prejudice of the assigned arbitrator.
• The arbitrator may approach a decision that is based on simple notions of equity, rather than the facts or the relevant law. There is a risk that an arbitrator will ignore the contract in favor of a more "equitable or fair" result.
• arbitration carries the risk that a losing party will refuse to accept or ignore an arbitral decision. However, arbitral awards are recognized and enforceable by the courts of most nations. • "One of the complaints about arbitrations these days is that it has become pretty expensive," said John A. Sherrill, a litigator and arbitrator with the law firm of Seyfarth Shaw LLP • Arbitration clauses in contracts that are imposed on less powerful entities are typically ultimatums and force them to either “take it or leave it” with very few alternatives. In addition to the fact that arbitrators are not necessarily attorneys who are well versed or even familiar with the law. Comparatively, the capability and vast capacity of Litigation as dispute resolution alternative may make it a more attractive than arbitration. Here are several reasons why: • Limited discovery which is typically the tradition of arbitration can keep your costs down, but it can also make it more difficult to try the case effectively. Attorneys can achieve the best results for their clients when they have as much relevant information as they can possibly obtain. The best way to obtain this information is through the depositions of people with knowledge which is better provided through litigation as opposed to arbitration. • The ability to appeal a decision may also be a reason why litigation may prove to be a better option of resolution than arbitration for some parties. The finality in the decision of an arbitrator is sometimes unattractive and can be a deterrent from this process. • Finally, a party may choose to litigate to avoid further frequent disputes down the line. In most cases after a final decision from an appellate court, judgements are respected and followed. In comparison, arbitration, may provide for parties to frequently dispute and disagree.
Non-the less, arbitration, may still be an attractive alternative dispute resolution option for some parties and here’s some reasons and grounds why:
• Specialized Decision-Makers:
Arbitrations involve a selection of a panel of arbitrators who are either attorneys who practice in a certain area or other industry professionals and are very familiar with that area. This is usually beneficial to the disputing parties. In contrast, Judges will often know very little about certain types of cases. This will often make it difficult for the attorney to effectively present the case. • Forum selection
Parties can decide which body of arbitrators they agree to settle disputes prior to any actual disputes. This is also beneficial as it provides leverage and flexibility to the parties. • Privacy & Speed
Records of arbitrations are not publicly...